Use of proceeds

Reconcile gross funds, offering costs and net capital to specific purposes, timing, approvals and measurable milestones.

Quick answer

Use of proceeds describes how an issuer intends to apply capital raised in an offering or financing. A decision-useful schedule distinguishes gross and net proceeds, allocates approximate amounts by purpose, states timing and dependencies, and identifies any repayment of debt, related-party payment, acquisition or working-capital use.

Use the worked example

Meaning and transaction use

SEC staff guidance says Item 504 of Regulation S-K requires disclosure of the principal purposes for net proceeds and the approximate amount intended for each purpose. [S1]

The same guidance notes that proceeds in a best-efforts offering may vary with the volume sold, which makes priority and scenario disclosure relevant. [S1]

Proposed control method: maintain base, minimum and maximum raise cases; tie each allocation to an owner, milestone and payment date; and track actual spending against the approved schedule.

Worked example

Illustrative allocation only. Assume USD 12 million of gross proceeds and USD 600,000 of offering costs. Allocate net proceeds to expansion, product development, working capital and debt repayment.

Scroll the table horizontally to view all columns.

Use	Calculation	Amount
Net proceeds	12.0 - 0.6	USD 11.4 million
Expansion	11.4 x 40%	USD 4.56 million
Product development	11.4 x 25%	USD 2.85 million
Working capital	11.4 x 20%	USD 2.28 million
Debt repayment	11.4 x 15%	USD 1.71 million

The allocations sum to USD 11.4 million. Actual application remains subject to closing, approved budgets and disclosed flexibility.

Proposed transaction review process

Reconcile the raise

Bridge securities, price, gross proceeds, costs and net proceeds.

Allocate uses

State purpose, amount, timing, owner and dependency.

Model scenarios

Prioritise uses under minimum, base and maximum funding cases.

Monitor spending

Compare actual cash use and milestones with the approved schedule.

Evidence checklist

Offering evidence

Term sheet, subscription data, fees and closing statement.

Budget evidence

Capex, hiring, acquisition, debt and working-capital schedules.

Approval evidence

Board approvals, delegated authority and related-party review.

Monitoring evidence

Bank records, invoices, milestone reports and variance explanations.

Decision framework

Situation	Proposed action
The raise is smaller than planned	Apply the disclosed priority order and revise milestones.
Debt repayment is proposed	Reconcile payoff, fees, security releases and related parties.
An acquisition is unidentified	State the uncertainty and keep the allocation conditional.
Spending departs from plan	Obtain approval and assess disclosure and investor-consent requirements.

Common errors to check

Equating gross proceeds with deployable cash.
Using vague categories without amounts or timing.
Allocating more than net proceeds.
Failing to disclose debt or related-party payments.

Reconcile the proceeds schedule

Bring the offering terms, fee schedule, budget and cash-flow forecast to a use-of-proceeds review. Link net capital to approved priorities and measurable milestones.

Discuss the transaction

Primary references and editorial scope

SEC: Staff observations in smaller reporting company IPOs
Item 504 principal-purpose and approximate-amount disclosure guidance. Reference checked 17 September 2026.

Editorial qualification

General equity-fundraising education. Figures are hypothetical. Required disclosure, investor consent and permitted uses depend on the offering, documents and jurisdictions.

General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.